We at ALFA are aware of the impor-tance of the company’s corporate social and environmental responsibility, in order to meet our commitment of sustainable growth and of generating value for our stakeholders.

This report sums up ALFA’s most important achievements and progress in the area of social responsibility last year. The actions are presented according to the Global Reporting Initiative (GRI) methodology, and represent our firm commitment to contribute to the development of our employees, the communities who welcome us, and the natural environment that supplies us the inputs we need to operate.

During 2016, ALFA once again faced a difficult economic scenario, which included low oil prices, greater volatility in the exchange rate of the peso against the dollar and slower growth in some of its main markets, coupled with the effects of the electoral process in the United States.

To meet these challenges, ALFA drew on the strengths it has been building over the years, like: operating efficiency, cutting-edge technology and market leadership, and ultimately reported results in line with estimates. It was also able to move ahead on its investment programs to improve operations, increase capacity and enhance the value of its products and services, as well as to expand its geographical presence.

Sigma built a modern facility in Spain, replacing the one destroyed by fire in 2014. Alpek began the construction of a second energy cogeneration plant in Mexico, which will allow for more efficient, cleaner operation, acquired a PET plant in Canada and an expandable polystyrene plant in Chile. It also announced an agreement to buy two polyester plants from Petrobras in Brazil. Nemak commissioned an autoparts plant and a machining plant in Mexico, bought a company in Turkey, and made progress on construction of a plant in Slovakia that will produce structural components. Meanwhile, Alestra merged with Axtel to create a more competitive company in the Mexican IT and communications industry.

ALFA also continued investing in initiatives to strengthen the four pillars of its corporate social responsibility: Internal Well-Being, Community, Environment, and Economic Development.

The most significant social responsibility challenges facing ALFA today encompass employee health and safety, water management, reducing water, air and soil emissions, as well as its products’ lifecycle. All of these merit special attention by ALFA’s management and companies.

In the area of Internal Well-Being, ALFA continued to boost health, safety, training and development programs, as well as initiatives to reach a better familiy-work balance.

Regarding safety, although in previous years we had succeeded in lowering the number and seriousness of accidents, in 2016 there was an upturn. This inspires us to strengthen our unceasing efforts toward achieving zero work accidents.

Regarding our performance towards our Communities, we maintain relationships of trust, respect and collaboration with those where the company operates. In addition to the support ALFA provides, specially to those in greatest need or in contingency situations, the company dedicates substantial resources to the education area. ALFA Foundation Educational Project continued to grow, and today it operates three campuses and receives 1,250 high school students. During the year, students from this Project had outstanding achievements in various academic competitions organized by Mexican and international institutions.

Regarding our performance towards the Environment, we invested in the generation and use of clean energies. We are building a new cogeneration plant in Tamaulipas that will operate on natural gas, and signed an agreement to receive wind energy that will power Sigma’s operations in Mexico. These are just two examples of the companie’s efforts in this area.

We also worked on the improvement of water management, since water is a key input to our operations. With this in mind, ALFA invested in optimizing its use, re-use, and discharge quality.

In the area of Economic Development, ALFA supports programs to strengthen its supply chain, such as providing consulting to supply chain on how to improve their operations and the quality of their products, supporting the vendors who sell ALFA’s products, and providing timely and useful information on the products and services to clients and consumers.

Through all the programs and achievements presented in this report, we strive to assume an increasingly active role as positive agents of change in the world around us.

San Pedro Garza García, Nuevo León, Mexico, February 20th, 2017.


Armando Garza Sada

Chairman of the Board of Directors

Álvaro Fernández Garza

President

We at ALFA are convinced that investments in social responsibility are invariably repaid in benefits for our employees, our communities, the environment and our supply chain, all of which are driving forces in the sustainable growth of our company.